Posts from Thursday Jul 1 2010

Large Japanese manufacturers are optimistic about business conditions for the first time in two years, according to the Bank of Japan’s much-watched Tankan survey. The survey, which has a response rate of more than 98 per cent from more than 10,000 companies is one of the most closely watched indicators by Japan’s policymakers, suggested that businesses were becoming increasingly confident, the FT said. FT Alphaville also commented on the ‘TanKANnery‘.

Fears that the US recovery is losing momentum were reinforced on Thursday by disappointing data on the labour market and the manufacturing and housing sectors, the FT reported. Jobless claims rose unexpectedly, while growth in the US manufacturing sector, which has been one of the bright spots of the US recovery, appears to be slowing. In housing, pending home sales tumbled by 30% in May, much worse than the expected 12.5% drop.

China unveiled its most ambitious effort for greater international influence on Thursday with the launch of a global 24-hour English-language TV news network run by Xinhua. The state news agency said CNC World could be received in Asia over satellite this week and available around the world from next month. In early October, the company aims to have deals to get CNC World on cable channels in Western countries, the FT said.

The yen surged to its highest level against the dollar so far this year as worries about the health of the global economy boosted haven demand for the Japanese currency, the FT reported. Weaker-than-expected Chinese activity data on Thursday combined with continued weakness in global equities to heighten risk aversion and support the yen.The yen rose to a high of Y86.97 against the dollar, its strongest level since December.

Chalco, the second-largest aluminium producer, has pulled out of a A$3bn deal to develop a bauxite refinery in Australia, blaming a drop in aluminium prices and difficult global conditions, the FT reported. This would have been the first Australian investment for the Hong Kong-listed subsidiary of Chinese state-owned Aluminium Corporation of China and comes after its parent’s offer to inject $19.5bn into Rio Tinto last year was turned down.

Toyota on Thursday said it would recall 270,000 Lexus luxury cars after it discovered that a key component in their engines was susceptible to cracking and could cause the vehicles to stall, the FT reported. Thursday’s revelation of the defect in some of the Japanese company’s most expensive models was a further blow to its already battered reputation for quality.

Goldman Sachs executives on Wednesday rejected allegations that the bank was overly aggressive in seeking collateral from AIG as it hurtled toward its $180bn government bail-out, noting the troubled insurer had refused to share valuations of the debt securities at the heart of the companies’ dispute, the FT reported. In testimony before the Financial Crisis Inquiry Commission, Goldman and AIG executives blamed each other for exacerbating AIG’s woes.

Nervous investors in China had fresh cause to worry on Thursday as a slew of reports on manufacturing suggested that the pace of growth in factory activity was slowing across much of Asia and might even have turned negative in China, the FT said. Data showed China’s manufacturing output contracted slightly on one unofficial but closely watched measure while the country’s National Bureau of Statistics described the official numbers as grim.

Jeffrey Immelt, GE’s chief executive, launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals, the FT reported. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” GE later moved to distance itself from his remarks.

We are looking for natural writers, with an interest in and aptitude for all things financial – and, crucially, with the ability to be pleasant and have a sense of humour at unspeakably early hours of the morning. Read more

KNOC, South Korea’s national oil company, is exploring a $1.5bn offer for the FTSE 250 oil explorer Dana Petroleum as part of a foreign acquisition spree planned over the next two years, FT Alphaville reported, citing people familiar with the situation. KNOC has made preliminary contact with Dana’s management about arranging an agreed deal. Korean-based sources said KNOC was willing to pay a “significant premium” for Dana shares Read more

There is nothing untoward with our accounting as Citigroup’s report acknowledges. We report in line with statutory guidelines and the accounts are externally audited. The issues discussed in the report have been gone over many times before and do not detract from our strong performance over the last year.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

According to the BBC, new EU rules to regulate bank bonuses – announced on Thursday - will hit Mayfair hard: the onerous restrictions on pay, says Robert Peston, the BBC’s business editor, will apply to hedge funds too:

I have learned that the bonuses paid to senior executives at hedge funds and fund managers are to be subject to strict conditions, under new EU-wide rules that have been agreed by EU members states and legislators. Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Here’s an interesting way to make a good a pension fund deficit – fill it with 2.5 million barrels of maturing Scotch whisky.

This novel idea has been dreamt up by Diageo and forms a key part of a 10-year funding plan for the drinks group’s UK Pension Scheme (which at the time of the last the triennial actuarial had a deficit of £862 million). Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

If investors really ♥ junk for most of this year, they really really might ♥ mortgages.

It’s a point you might not have realised just by looking at non-agency residential mortgage-backed securities (RMBS) and high-yield bond indices over the past 13 months or so. Non-agency mortgages are those that aren’t covered by the US GSEs, and so are without a government-backed guarantee. Read more

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

Bloomberg has some numbers to go along with FT Alphaville’s April analysis of the Federal Reserve’s Maiden Lane portfolio, the special-purpose vehicle it created to help JP Morgan’s takeover of troubled Bear Stearns in 2008.

As we pointed out, Fed chairman Ben Bernanke’s April 2 2008 statement that the assets taken from Bear Stearns to collateralise the Fed’s $29bn loan were “entirely investment grade” wasn’t strictly true. The Fed accepted at least 10 bonds that were rated sub-investment grade before that statement. Read more

Republicans moaned unconvincingly for months that the financial reform bill perpetuates endless taxpayer bail-outs. It’s supposed to do the exact opposite, of course, giving regulators the power to step into a failing institution like AIG or Lehman, stabilise it to preserve value and prevent any system-wide shocks, then liquidate it, using the assets to pay all costs and to pay off creditors. If they need more cash they can use Treasury funds but must claw it back from the industry over time.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

How worried should we be about the rollover in lead economic indicators?

As Lex noted earlier this week, Economic Cycle Research Institute has scolded pundits, such as SocGen’s Albert Edwards, for misinterpreting its widely followed indices. According to the ECRI all they indicate are a pronounced slowdown, typical after the initial recovery from a recession. Read more

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Volatility reigned in 2010′s second quarter, the WSJ reports, with the Dow Jones Industrial Average posting its first quarterly drop since the first three months of 2009. The S&P 500′s performance was its worst since the final three months of 2008, sliding by 11.9 per cent — which was also the percentage rise in gold per troy ounce, to $1245, after investors flocked to safe havens. Bonds have meanwhile outperformed stocks by the widest margin since 2001, according to Bloomberg.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Chinese factories slowed production in June for the first time in fifteen months, while manufacturers in other major Asian countries eased the pace of growth in output, according to new data released on Thursday, the FT reports. Both official and unofficial Chinese PMI showed a marked slowdown, the WSJ adds, indicating that Beijing’s policy of economic tightening is entering its stride. Markets reacted to the data with a heavy sell-off, according to the FT’s global market overview, with S&P 500 futures pointing to a 0.5 per cent loss.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

Relieved at the results of Wednesday’s three-month European Central Bank offer? Not so fast. FT Alphaville observes that Europe’s banks are tapping ECB liquidity less overall — but this may be obscuring discrepancies between banks, creating a two-tiered system: those that can survive higher interbank rates in the future, and those that still have to cling to the ECB’s petticoats. Read more